Membership Unleashed by Les Mills April 2012

MEMBERSHIP UNLEASHED
FUTURE OF FITNESS

1 LES MILLS INTERNATIONAL © 2011

THE FUTURE OF FITNESS Health & Fitness
CHALLENGES
facility attendance has
§ LES MILLS white paper highlights become the biggest
big challenges we face if we are to adult “sport” in the
survive Western world. Bigger
1.  Aging obese markets than football, tennis
2.  Fitness Seekers want other options
and golf combined
3.  Play drives activity
4.  Activity must offer something more


FUTURE CHALLENGES
AND OPPORTUNITIES
1.  The number of people who fit our
current offerings is reducing
reflected in a population that is
aging and suffering from obesity

2.  Fitness seekers want better
quality products, more control and
mobility, and ultimately more
choice in how they exercise


FUTURE CHALLENGES AND
OPPORTUNITIES
3.  “Play drives activity” with growth in two
distinct areas:
§  Blends of game, sport and dance will offer fitness
and activity that are driven by fun, pleasure and
sociability
§  ‘Exergaming’ consumers will seek fitness and
activity as a game driven by enjoyment.
§  Technology will evolve this segment into
‘exertainment’ with rich sensory experiences, and
eventually virtual realities that involve movement,
social networks, escapism and new experiences.


FUTURE CHALLENGES
AND OPPORTUNITIES
4.  Activity offers ‘more’…
§  ‘Relationships and community’, in
which people seek
communication, connection, and
shared experiences
§  ‘The search for meaning’, in which
people place emotional, social and
spiritual integrity at the core of
their beings
§  Low-tech solutions like returning to
nature, opting out or disconnecting
§  New techniques like proactive
medication


THE PROBLEM – ACQUISITION IN A COMPETITIVE
MARKET
•  Big-box operators with large range of products at low price point
•  Low service operators at even lower prices
•  Skeptical customers viewing price as the only point of difference


THE PROBLEM – RETENTION OF SMALL POPULATION

•  >16% of the US population go to a Health and Fitness facility
•  About 15M new memberships sold per year and 12M quit
•  Nearly 1:4 leave within the first 12 months of joining
•  Average length of membership is 67 weeks*

*For those paying monthly, without a contract


STANDARD APPROACH FIRST PRINCIPLES
§ The goal is to grow earnings - EBITDA
•  Grow revenues
•  Cut costs

§  When EBITDA is #1 guiding principal:
•  Revenues are revenues
•  Costs are costs

LES MILLS INTERNATIONAL © 2011

STANDARD APPROACH
§ If all revenues are treated as equal,
and acquisition is hard you try to EXECUTION
supplement membership dues with
other products and service


STANDARD APPROACH
§ If all costs are treated as equal,
management looks to trim variable
costs like payroll, training and and
services EXECUTION


STANDARD APPROACH
§ Results of cost cutting:
•  Members notice
•  Generates negativity
•  Club less appealing
•  Total savings are minimal
CONSEQUENCE
§ Results of supplementary
revenue sources:
•  Division is created between
‘cost’ and ‘revenue centers’
•  Members resent add-on costs
•  Additional revenues are minimal


REVENUE AND COSTS
§ All revenues are NOT created equal:
§  membership dues are an annuity
§  Incremental revenues comes from
membership revenue

§ All costs are NOT equal
§  Reduced member experience causes
increase in attrition and decrease in
referral
REALITY CHECK
§  Any revenue loss occurs at the margin
which directly impacts the bottom-line
profit $1 $17


THE PROMISE
§  An integrated method that insulates you from:
•  Big box competitors
•  Bare bones competitors
•  Seasonality


A NEW MENTAL MODEL
Profit maximization is OLD
Purpose maximization is NEW


MEMBERSHIP GROWTH STRATEGY

1.
Relationships 1.
Member
Retention

Facilitation Engagement Membership Earnings

2.
Results 2.
Member
Acquisition


THE MECHANICS OF FACILITATION
§ During the on-boarding phase, you need the new member to exercise
regularly at least ≥ once a weekly, exercise productively and ensure they
develop relationships with a broad range of staff

§ Once a member has settled-in, you need them to exercise consistently at
least ≥ twice a week – and you need to ensure that they develop
relationships with other members

1.
Relationships 1.
Member
Retention


2.
Results 2.
Member
Acquisition


THE ECONOMICS OF FACILITATION
§ Facilitation takes many forms – each with a different cost-effectiveness profile:
•  Front Desk staff contact with guest and members
•  Membership staff enrolling a guest
•  Spotting a member in the weight room
•  A one-on-one personal training session
•  A small group training session
•  A group-fitness class
•  An educational event
•  A social event

1.
Relationships 1.
Member
Retention


2.
Results 2.
Member
Acquisition


THE PROBLEM WITH FACILITATION
§ Typically Health and Fitness facilities are not engineered to enable facilitation:
•  Department ‘silos’ with often with a less-than-positive view of one another
•  This is a consequence of the ‘profit center’ versus ‘cost center” approach from
management

§ As an example; PTs and Group-Fitness instructors are often Contractors –
meaning that, outside of structured sessions, facilitation is the responsibility of:
•  Front Desk Staff
•  Membership Staff
•  Fitness Floor Staff 1.
Relationships 1.
Member
Retention

•  No one at all

2.
Results 2.
Member
Acquisition


MSG > ENGAGEMENT > MEMBERSHIP
§ Not surprisingly, the primary driver of membership is engagement :
•  To keep a member, ensure that: visitation frequency ≥ once weekly
•  To add a member, ensure that: visitation frequency ≥ twice weekly

§ Instead of trying to sell memberships, focus on prospect engagement
•  Use an initial trial to create buy-in

1.
Relationships 1.
Member
Retention


2.
Results 2.
Member
Acquisition


MGS > FACILITATION > ENGAGEMENT
§ We must appreciate that health and fitness facilities are not always
engaging, special effort is required.
§ Engagement comes from: Relationships, Results and Environment

1.
Relationships 1.
Member
Retention


2.
Results 2.
Member
Acquisition


MGS > FACILITATION > ENGAGEMENT
§  Relationships always develop in two phases:
•  Member-to-staff relationships
•  Member-to-member relationships

•  However member-to-member relationships lock-in established members and
lock out new ones
•  Without trained facilitation by staff, only a small % of members will engage

1.
Relationships 1.
Member
Retention


2.
Results 2.
Member
Acquisition


MGS > MEMBERSHIP > EARNINGS
§ Membership = Earnings
§ Membership growth potential is almost open ended

1.
Relationships 1.
Member
Retention


2.
Results 2.
Member
Acquisition


PRACTICAL STEPS


FACILTATION
MEMBERSHIP ONBOARDING


FACILITATION CHALLENGE

§ “Every year the industry sells
millions of memberships to men and
women who, though they earnestly
wish that they could become regular
exercisers, have not yet developed
the discipline or habit of regular
exercise
IHRSA Guide to Retention 2007


§ People join to get results and
motivation BUT they stay because
they make friends
§ The membership consultant can
be the first powerful relationship
§ Membership team must build real
solutions versus hard sales.
§ A high quality member onboarding
process focusing on attendance
during the first 12 weeks is
essential


§ Best practice:
§ Pay Membership and Personal
Training Commissions based on
usage during first 12 weeks of
membership.
§ 21 visits in 90 days


EXAMPLE


FACILTATION
ACTIVITIES


PEOPLE CAN GET AN EXERCISE SOLUTION ANYWHERE.
BUT NOT MOTIVATION.

THE ROLE OF MOTIVATION

§  “Motivation is a trigger that
ignites membership.

Understanding and
leveraging the members
motivation affects retention”
IHRSA Guide to Membership Retention


FACILITATION THAT
MOTIVATES
§ The five major categories include:
•  Membership/Front Desk (1 member)
•  PT (1-3 members)
•  Small-Group (4-12 members)
•  Large Group (12+ members)
•  Events (unlimited)


FACILTATED EXERCISE - MAKE IT SOCIAL

Personal Training
Small Group Training
Group Fitness Training
Event Training

SOCIAL
FREELANCE FREELANCE CYCLE EDUCATIONAL
PT PROGRAMS PROGRAMS EVENTS
STRENGTH

STEP

DANCE

SPORTS

MARTIAL

MINDBODY

SENIORS

34 LES MILLS INTERNATIONAL© 2011

BRANDED FACILTATED EXERCISE MODEL

Personal Training
Small Group Training
Group Fitness Training
Event Training


PERSONAL TRAINING

§ A great way to increase the quality of
on-boarding, results and connection
between member and to staff
§ Can be a good source of revenue
§ Increase income opportunities and
career opportunities for GX instructors
§ However:
–  Best facilities only have ≥10% of members
using PT on regular basis vs. 30%+ in GX
–  Connection is with a single staff member: if
the member is unhappy with the PT or if the
PT leaves potential to lose the member
–  Typically no or low prescription of other
forms of exercise such as GX ,which is more
social and more holistic


PERSONAL TRAINING
§ Considerations
•  Match new clients with PTs carefully
•  PT Manager should check regularly with
customers to confirm if they’re happy with
their PT. Make it a formal part of the
process.
•  Offer short term courses
•  Encourage PTs to teach GX
•  PT can generate revenue for a facility but
its impact is relatively small


SMALL GROUP TRAINING
§ Currently the holy grail of the
industry
§ Everybody wants successful SGT
programs
–  Allows more people access to PT
–  Increases $/hr for PTs
–  Builds relationship between members…
they make good friends.
–  Brings back the spirit of sports teams
§ Challenges:
–  Best facilities only have 3% - 4 % of their
members doing SGT
–  As yet, no one has really made it
successful


GROUP EXERCISE.
THE MOST POWERFUL SOURCE OF MEMBER MOTIVATION
WHICH CREATES COMMUNITY AND EXCITEMENT IN
FACILITIES.
39

GROUP EXERCISE
§ Many facilities worldwide are being
hurt by low-budget competitors.
§ At the same time, there are
successful new business models
emerging eg:
–  Pure Yoga and Pure Fitness
(Asia and US) – Group Ex-only, charging
$165 per month in New York
–  Exhale Spa (US)
- $195 pm for classes
–  Soul Cycle and Flywheel (US)
- $32 per class


POWER OF GROUP EXERCISE
§ Retention
•  90% of exercisers prefer to exercise
in a group
•  Group exercise is cited as the
biggest influence (40%) on how long
people stay a member of a club
•  GX member retention rates are
higher than other member retention
rates, on average
§ Acquisition
•  60% of people rate GX classes as
the #1 important service offered by a
fitness facility
•  Satisfied Group Exercise members
refer people 3 times more than other
IHRSA/HCD/Les Mills (March, 2009)
members IHRSA Consumer Report USA (2011)
Micheal Scott Skudder (2010)


THERE IS ABSOLUTELY A COMMERCIAL CONNECTION
BETWEEN GROUP EXERCISE ATTENDANCE AND
LONG-TERM PROFITABLE FACILITIES.


SMART GX PROGRAMING
§ Prospects and members usually
need 3-5 types of training to cover
their basic needs
§ Make sure you have at least one
great program you can recommend
in terms of quality, experience and
consistency in each of these
categories
–  (21%) Strength
–  (19%) Cycle
–  (14% Mind Body
–  (12%) Dance
–  (9%) Martial
–  (25%) Cardio/Fusion/Other
Les Mills Scoreboard Global Report (April , 2011)


GX NEEDSCOPE MODEL

un High
bi lity/F Energ
Socia y /Chal
lenge
BOOTCAMP
SPORTS CONDITONING
SIMPLE DANCE
Conformity/Affiliation

NICHE CYCLE
DANCE MARTIAL ARTS
ACTIVE

Power
SENIORS
STEP

BARBELL
CORE

MINDBODY®
Rene n
w al
Perfectio

Essence Research ( 2004)


THE BOTTOM LINE IS.
GROUP EXERCISE ATTRACTS MORE MEMBERS, WHO
ATTEND MORE OFTEN, REMAIN LOYAL AND ATTRACT
NEW MEMBERS THEMSELVES.

ENGAGEMENT

ENVIRONMENT


ENVIRONMENT EFFECTS
ATTENDANCE
§ 70% of Members rate
“Ambience of the Studio”… as
an “Extremely Important or
Important” driver on their
attendance

Neilsen Research ( 2008)


ENVIRONMENT.
CREATE MORE A COMPELLING AMBIENCE.
48

§  Les Mills World of Fitness, Auckland*, New Zealand
§  12,000 members – current membership NZ$110 per month
§  5,000m2 / 53,500 ft2 Fitness Only Club
§  2,000m2 / 21,500 ft2 Group Fitness Area
§  4 studios – largest is 700m2 / 7,500 ft2
§  Over 150 classes per week
§  50%+ of total attendances
§  65 part time Instructors
§  9,000 + Group Fitness visits per week
§  M’ship retention rate 80% (IHRSA formula)

*City of 1.5M people with 175 health clubs


59

Inexpensive effects – photo blow-ups

ENGAGEMENT

RELATIONSHIPS


THE CHALLENGE
§ “Most of us aren’t really health
clubs, were not even clubs. We’re
just places where people come to
lift weights and run on a treadmill”
Michael Scott Scudder


ENGAGEMENT DRIVES
ATTENDANCE
§  12% of all cancellations would
be avoided if all new members
attended the facility at least
once per week during the 1st
calendar month after joining
§  FIA Top Ten strategies for Winning the Retention
Battle

§  High Attendance Correlates
with High Retention

§  IHRSA Guide to Membership Retention


ENGAGEMENT DRIVES
ATTENDANCE
Example
§  2000 members
§  Average EBITDA 18%
§  Average Retention 50%

Strategy
§  Improve Retention by 12%

Outcome
§  Members 120 @ $600
§  Increased Revenue $72000
§  Increased EBITDA 5% (23%)


ENGAGEMENT FOCUS
§ More people through the door more
often …
§  EBITDA and membership are not invalid,
but only a consequence of great facilities
and member attendance
§  Attendance should be the key metric but
is currently one of the least measured by
facility owners & managers
§ Member Attendance is ultimately the
biggest driver of membership and
profit, and as such, it should be our
biggest indicator of risk to financial
success


RELATIONSHIPS SUSTAIN
ENGAGEMENT
§  “Facilities with strong
member-to-member
connections have higher
retention”
IHRSA Guide to Member Retention


ONE MORE THING.
SUCCESS STARTS WITH ENGAGED STAFF.


HAPPY, ENGAGED AND LOYAL STAFF MAKE
HAPPY, ENGAGED AND LOYAL CUSTOMERS.

ENGAGE YOUR STAFF
§ Why should your staff care
about your business and
challenge themselves every
day?
§ To unleash company
performance and profit, you
need to unleash staff
performance, motivation and
loyalty.
§ People need to be engaged in
an inspiring and meaningful
purpose, something bigger than
them


ENGAGEMENT FROM
ENDEARMENT
§ Latest research shows that
companies can profit from
passion and purpose
§ Endearment is based on self-
knowledge, candor and
maturity -- three essential
elements of integrity -- in
interactions with others.
§ In return stakeholders place
uncommon trust in their
companies and products and
fall in love with them.


ENGAGE STAFF WITH THE
BIG PICTURE
§  By 2030, 50% of the USA population
will be obese (>30% BMI)
§  Traditional health care is failing
§  By 2016 the cost of the American
health system will have doubled to $4.1
trillion per year*.
§  It seems that our health is deteriorating
at almost as quickly as these costs are
increasing.
§  Need for a preventative focus
§  Health and Fitness facilities are
effective preventative health care
*2006 US Treasury report


HEALTH AND WELLNESS
AND OUR ROLE IN THE FUTURE
§ The world is facing a great holistic

health challenge and our industry is
perfectly positioned to play a big part
in the solution.
§ We are the exact opposite of the
cigarette and junk food companies,
and we have an intimate relationship
with a large percentage of the
world’s wealthiest, most influential
people.


VALIDATING STATEMENTS
§ “We are warriors in the battle
against inactivity and over
consumption”
LMI Instructor Creed, 1998

§ “Creating life changing experiences
every time, everywhere. One class
at a time, one participant at a time”
Les Mills Advanced Instructor Module 2011

§ “You have to find a way to make
people fall in love with fitness”
Les Mills, 1968


STAND FOR SOMETHING.
CREATE A CAUSE, NOT A BUSINESS...


CHANGING THE PERCEPTION
OF OUR INDUSTRY
§ Lifestyle Family Fitness (Florida)
teen fitness initiative
•  FREE 2-Month Summer
Membership
•  Teens can utilize all equipment &
participate in group exercise
classes
•  Hourly restrictions in place (i.e. non-
prime time)
•  Remember…teens have parents &
they grow-up to become paying
adults


MEMBERSHIP

EVENTS


GROUP FITNESS EVENTS.

ORGANIZING GREAT WOW EVENTS IS THE BEST WAY
TO CREATE MOMEMTUM, ENCOURAGE MEMBER
MOTIVATION, BUILD ATTENDANCE, COMMUNITY,
RETENTION AND GROW MEMBERSHIP

THE MEMBERSHIP EXPERIENCE CURVE
Experience
When you host GX events, you are
selling non-members an
experience, not a membership –
this makes selling so much easier

Les Mills GX Events
typically drive 10-20
New Memberships

Membership Sales

THE MEMBERSHIP EVENTS MODEL
Experience

Program 2
Launch Event

Quarterly
Re-launch
Event
Quarterly
Re-launch
Event
Program 1
Launch Event
Months

3 6 9 12


THE RESULT
§ As the number of staff/member-to-member relationships increases, so does
retention
§  With better new-member retention, you have more money to spend on
acquisition
§ With more compelling offers, sales becomes easier

1.
Relationships 1.
Member
Retention


2.
Results 2.
Member
Acquisition


HOW LES MILLS PARTNERS GO FROM GOOD TO GREAT


1. THEY IMPLEMENT THE LES MILLS GX SYSTEM


2. THEY USE THE RIGHT PROGRAM SOLUTIONS


3. THEY COMMIT TO REGULAR WORLD CLASS INITIAL
AND ADVANCED INSTRUCTOR TRAINING


4. THEY USE THE NEW CLUB PERFORMANCE TOOLS


5. THEY IMPLEMENT A ROBUST GX REPORTING SYSTEM


6. THEY HOST BROADWAY CLASS GX EVENTS
§ Point of sales training that leverages
group fitness as a key membership
sales tool
§ Les Mills has formulas for hosting
launch and relaunch events, on 3
different budgets, that are proven to:
– enhance member retention and
acquisition
– deliver significant ROI
– transform group exercise into a profit
centre


7. THEY LEVERAGE THE NEW US CONSUMER LES
MILLS PUMP INITIATIVE
§  Beach Body LES MILLS
PUMPTM Home DVD
§  Biggest marketing initiative
since the global launch of
BODYPUMPTM in 1997
§  Multi Million $$ Infommercial
§  Massive consumer drive of
new members to sites with
LES MILLS Programs
§  US launch May 2012


GX POWERED BY LES MILLS FROM GOOD TO GREAT

§  THE AVERAGE LES
MILLS LICENSEE
FACILITY HAS
500 MORE MEMBERS
PER CLUB THAN THE
GLOBAL AVERAGE

(1) Scoreboard Round 1 and 2
(2) Scoreboard Round 2



§ THE MAJORITY OF LES
MILLS™ PARTICIPANTS
WANT TO CONTINUE TO
TAKE LES MILLS™ IN NEXT
12 MONTHS



§ LES MILLS GX MEMBERS
ATTEND THEIR FACILITIES
ALMOST TWICE AS OFTEN

AC Nielsen (2010); IHRSA Consumer Report USA (2011



§ THE MAJORITY OF LES
MILLS™ PARTICIPANTS
WOULD ABSOLUTELY OR
STRONGLY RECOMMEND
LES MILLS™
PROGRAMS TO THEIR
FRIENDS AND FAMILY
AC Nielsen (2010); IHRSA Consumer Report USA (2011)



§ LES MILLS LICENSEES
TEND TO HAVE HIGHER %
OF CLUB ATTENDANCE
PARTICIPATING IN
GROUP EXERCISE



§ LES MILLS CLASSES
ATTRACT HIGHER
TOTAL CLASS
ATTENDANCE THAN
OTHER CLASSES, ON
AVERAGE



§ THE AVERAGE LES MILLS
LICENSEE ATTRACTS
AROUND 600 WEEKLY
GROUP EXERCISE
ATTENDANCES THROUGH
THE YEAR(3)


YOUR NEXT STEP

Schedule a Membership Growth Strategy Review
Create an action plan for the transition to Membership Growth Strategy
No Cost, No Risk, No Obligation


PARTICIPANT FEEDBACK FROM PREVIOUS SESSIONS

1. 
2. 
Non Commission Model
Sale People emotionally attached
15. 
16. 
Restore Mothers who gave up everything for their kids
People leave their Trainer and Instructors not the Club
3.  Accountability for Prescription 17.  Team Training could be a great tool to engage the
4.  CXWORXS College segment
5.  What keeps your club open? 18.  Clubs should collaborate better with Physical Therapy
6.  What is your Value? What is on your mind? Clinics to break the cycle of chronic illness
7.  Abundance of daily drama – Seek Wellness 19.  Model required for small studios
8.  Keep people ‘connected’ regularly 20.  How do we create community when we operate in silos
9.  Attendance = Membership 21.  Club Culture – How to build this
10.  Members Surveys 22.  Global perspective “refreshing”t
11.  Staff Engagement – Get staff taking the Group X 23.  Engagement is key – Foster culture with corporate
classes account
12.  Staff training pays for it self, Purpose, Autonomy, 24.  Look after home/community/obesity war
Mastery and Scalability 25.  Equity small club (1500 membership) Beach Club
13.  Consumer – Holistic View 26.  Get the members together
14.  Fitness has become a luxury not a necessity 27.  Difficulty gettting people together
28.  Group Exerciser is thre heartbeat of the Club


Membership Unleashed by Les Mills April 2012

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Membership Unleashed by Les Mills April 2012